Feb 15, 2018

US President Donald Trump criticized India for high import duties on Motorcycles (ITC HS code 8711) referring to the tariff hurdle faced by Harley Davidson while exporting to India. Some quotable stuff from Donald Trump's discussion with US Congress is reproduced below:

“We pay a tremendous tax to get into their countries — motorcycles, Harley-Davidson — it goes into a certain country. I won’t mention the fact that it happens to be India, in this case,” the US President said, amidst laughter from the audience.

“And a great gentleman called me from India and he said, we have just reduced the tariff on motorcycles, reduced it to 50 per cent from 75, and even 100 per cent’,” Trump said in an apparent reference to his last week’s conversation with Prime Minister Narendra Modi.

“If you are Harley-Davidson, you have 50 to 75 per cent tax, tariff to get your motorcycle, your product in. And yet they sell thousands and thousands of motorcycles, which a lot of people don’t know, from India into the US. You know what our tax is? Nothing!” he told the lawmakers and his Cabinet colleagues.

“So I say we should have reciprocal taxes for a case like that. I am not blaming India. I think it’s great that they can get away with it. I don’t know why people allowed them to get away with it. But there’s an example that’s very unfair. And I think we should have a reciprocal tax,”

Interesting. What do the numbers say?

Below is the table of Motorcycles exports from India (all capacities) for the latest one year of available official data, arranged in decreasing order of value. India roughly exports around 1.5 Billion USD worth of motorcycles per year to the world.

USA imports less than 1% of our total exports and appears at No. 22. Trump is right to that extent. India can send only a few thousand motorcycles for that sum. The zero duty at the US Border doesn't appear to help Indian motorcycle exports. There is a reason. We don't (yet) manufacture leisure/sports motorcycles of the capacity range that US citizens like to ride.

India imports roughly 45 Million USD worth of motorcycles from the world. Of this, around 25% come from USA. For that sum, again the number would be a paltry few thousands. We have a free trade agreement with Thailand directly, and also through Indo-ASEAN route. Thailand enjoys preferential tariffs in some capacities (heavier ones) of motorcycles. That advantage shows. Otherwise USA is doing quite well for the 100% tariff it claims to have suffered all these days. With reduction in import duties, we may see a spurt in imports of motorcycles from USA. That's what the great gentleman from India was trying to impress over phone.

Nevertheless there is a point in what US President said. Auto sector in India is a success story. Indian Auto sector was able to organize, represent, negotiate and resist sudden opening up during the initial days of liberalization. It exposed itself gradually and grudgingly. This was one of the factors which led to a strong auto sector. The auto sector is still one of the most protected sectors in India. This is an enviable position for any negotiator, including US President.

A country like US which has a huge trade deficit in auto trade and which faced massive layoffs in the sector during last decade would naturally make these noises. No wonder the president ranted. I shall leave the readers with the stats from the United States' point of view (Images courtesy: https://comtrade.un.org/labs DIT BEIS visualization tool)